U-STOR BELL, LLC v. Maricopa County
| Decision Date | 26 December 2002 |
| Docket Number | No. 1 CA-TX 01-0013.,1 CA-TX 01-0013. |
| Citation | 204 Ariz. 79,59 P.3d 843 |
| Parties | U-STOR BELL, L.L.C. an Arizona limited liability company, dba U-Stor Bell, Plaintiff-Appellee, v. MARICOPA COUNTY, a body politic and corporate, Defendant-Appellant. Asi Self Storage, L.L.C., an Arizona limited liability company, dba Arizona Storage Inns, Plaintiff-Appellee, v. Maricopa County, a body politic and corporate, Defendant-Appellant. Amerco Real Estate Company, Inc., a Nevada corporation, dba U-Haul Center Oracle, U-Haul Center East Speedway, U-Haul Center West Ina Road, Plaintiff-Appellee, v. Pima County, a body politic and corporate, Defendant-Appellant. |
| Court | Arizona Court of Appeals |
Janet Napolitano, Attorney General, By Frank Boucek, III, Assistant Attorney General, Phoenix, Attorneys for Defendants/Appellants.
Thomas J. Zavada, Pima County Attorney, By Alison K. North, Deputy County Attorney, Tucson, Attorneys for Defendant/Appellant.
Steptoe & Johnson, LLP By Patrick Derdenger, Bennett Evan Cooper, Phoenix, Attorneys for Plaintiffs/Appellees.
¶ 1 The appellee taxpayers are owners of self-storage facilities. Each of their facilities incorporates an apartment in which the facility manager must live as a condition of employment ("manager apartments"). For ad valorem property tax purposes for the tax years 1998 through 2001, Maricopa and Pima Counties ("the counties") classified the taxpayers' self-storage facilities, including those portions used as manager apartments, as class one commercial property.1
¶ 2 When the taxpayers challenged this classification, the tax court granted summary judgment in their favor. It determined that the manager apartments should instead be classified as class four property "used solely as leased or rented property for residential purposes." A.R.S. § 42-12004(A)(1) (Supp. 2001) ().2 See also A.R.S. § 42-12006(A)(1) (1999). The counties appeal. We agree that the tax court's determination was in error and reverse.
¶ 3 The taxpayers operate each of their self-storage facilities as a for-profit commercial enterprise. Each of the taxpayers' self-storage facilities has storage units of various sizes that the taxpayers rent to members of the public who use them to store tangible personal property.
¶ 4 Most self-storage facilities have an office area for the manager's use. Some self-storage facilities, including the taxpayers', also have manager apartments. For purposes of this action, the parties have stipulated that each taxpayer requires its on-site managers to reside in the manager apartments "for the purpose of both managing the mini-storage facility and providing security for the premises." Any on-site manager whose employment ends must vacate the manager apartment so that a new on-site manager may move in.
¶ 5 The taxpayers separately brought these actions in the tax court to challenge the commercial classification of their self-storage facilities. The actions were later consolidated. On cross-motions for summary judgment based on stipulated statements of facts, the tax court sustained the counties' class one commercial classifications of the taxpayers' self-storage facilities.
¶ 6 The taxpayers moved for reconsideration to the extent that the tax court's ruling had sustained the class one classifications for the manager apartments included in those facilities. The tax court, applying Hayden Partners Limited Partnership v. Maricopa County, 166 Ariz. 121, 125-26, 800 P.2d 987, 991-92 (App.1990), ruled that the manager apartments should have been classified as class four leased or rented "residential property" because the circumstances establish objective indicia of intended residential use.
¶ 7 The tax court entered judgment in accordance with its rulings. The counties timely appealed. The taxpayers each cross-appealed from the tax court's determination that the counties had correctly classified all storage units as commercial property. All cross-appeals were later dismissed by stipulation in this Court. We have appellate jurisdiction. A.R.S. § 12-2101(B) (1994).
¶ 8 The determinative question is whether the taxpayers' manager apartments are "used solely as leased or rented property for residential purposes" within A.R.S. § 42-12004(A)(1). The taxpayers, citing Krausz v. Maricopa County, 200 Ariz. 479, 481, ¶ 11, 28 P.3d 335, 337 (App.2001), argue that due to the use made of the manager apartments, they should be classified as class four leased residential property instead of the more generally applicable class one commercial property. We cannot agree. ¶ 9 Krausz supplies a useful comparison but is not directly applicable here. In Krausz, the appellants contended that a private building that they leased to the Arizona Department of Environmental Quality ("ADEQ") could not properly be classified as class one commercial property. The Krausz appellants so alleged because they claimed that the sole use that ADEQ actually made of the property was a "governmental" use. Appellants made this argument even though no statute recognized a separate tax classification for governmental use.
¶ 10 Noting that the taxpayer's lease of the property to the government was a commercial use of the property by the taxpayer and further noting that there were no separate statutory property tax classifications for property used for governmental purposes, this Court upheld the class one commercial classification on the property.
[I]n all [Taxpayers'] hypotheticals the tenant's use of the property brought it within a specific property tax classification, thereby controlling the outcome. The situation in Taxpayers' case is quite different. Here, it is only the landlords' use of the property that places it within a property tax classification. Taxpayers lease their building for profit, and thereby put it to a commercial use within the meaning of A.R.S. section 42-12001(12). It is only the tenant, ADEQ, that puts the leased building space to a governmental use, which does not fall within the terms of any specific property tax classification that would override section 42-12001(12). Accordingly, Taxpayers' property is "devoted to ... any commercial ... use" and is properly classified as class one (commercial) property. A.R.S. § 42-12001(12).
Id. at 481-82, ¶ 11, 28 P.3d at 337-38.
¶ 11 Here, similar to Krausz, the question is whether the property at issue qualifies for a class four statutory tax classification. To do so, the managers' apartments must be "used solely as leased or rented property for residential purposes." A.R.S. § 42-12004(A)(1). Otherwise, the property is appropriately classified as class one commercial property "devoted to any other commercial or industrial use." A.R.S. § 42-12001(12).
¶ 12 We conclude that the apartments were neither used solely as leased or residential property for residential purposes, nor were they "leased or rented" as that term is used in the statute.
¶ 13 It is true that the taxpayers' on-site managers use the manager apartments as their residences. However, manager apartments are not offered for public occupancy. Manager apartments are occupied exclusively by persons who are actively employed as managers of the self-storage facilities where the apartments are located. Such persons may continue to occupy their apartments only while they are so employed, and must vacate them when their employment ends.
¶ 14 Here the parties have stipulated that each taxpayer requires its on-site managers to reside in a manager apartment "for the purpose of both managing the mini-storage facility and providing security for the premises." In a similar context, our supreme court has concluded that employer-required living quarters constitute the ongoing site from which the occupant conducts the employer's business even after traditional work hours:
The authorities are agreed that if an employer furnishes living accommodations for an employee and requires him to occupy the same while employed, the continuity of employment is not broken while he is actually using and occupying the premises for the purpose for which it was furnished. In other words, under such circumstances he is still within the orbit of his employment while using the premises for living quarters, even though he be off duty from regular shift. The reason for this is that if his employer requires such occupancy, the same is an incident to the obligation of his regular employment. The activity of using such housing accommodations is exercised as an incident to the performance of his duties to the employer.
Johnson v. Ariz. Highway Dep't, 78 Ariz. 415, 417, 281 P.2d 123, 125 (1955) (citation omitted).
¶ 15 Thus, as Johnson suggests, the employee's use of the manager's apartment is incidental to the performance of his duties to the employer. Consequently, on-site managers do not occupy their apartments solely for residential purposes. Additionally, the taxpayers retain in no small measure the "use" of the manager apartments. Acting through their mandatorily resident managers, the taxpayers use the manager apartments as an on-site base by which the taxpayers have their managers manage and provide security for their self-storage enterprises. Thus, the manager apartments cannot reasonably be viewed as "used solely as leased or rented property for residential purposes" within A.R.S. § 42-12004(A)(1) (emphasis added).
¶ 16 Contrary to the taxpayers' assertion, the tax court did not "rule" that the manager apartments are "used ... solely for residential purposes." The tax court, which did not have the benefit of our opinion in Krausz, relied on Hayden Partners Limited Partnership v. Maricopa County, 166 Ariz. 121, 800 P.2d 987, to find that the property had "indicia of intended residential use."3 While we can agree with the tax court that there are indicia of residential...
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